Intel in hot water for anti-competitive tactics – FTC files suit

As we predicted last week, Intel had their corporate hand slapped for being in the cookie jar. The other shoe dropped on Wednesday for Intel when the FTC [Federal Trade Commission] announced they were suing them [PDF Download] for anti-competitive practices which "stifle competition and strengthen their monopoly."

As we explained in last week’s installment of Intel’s legal problems, Intel easily qualifies as a monopoly by shipping over 85 percent of the CPUs in the world. It isn’t illegal to be a monopoly and charge whatever the market will bear. According to Scott Hemphill, a law professor at Columbia University, "What’s not O.K. is conduct that’s aimed at unreasonably prolonging and maintaining that monopoly."

Prolonging a monopoly is one of the main charges in the FTC complaint. On page 2, item 5 says "Intel engaged in a number of unfair methods of competition and unfair practices to block or slow the adoption of competitive products and maintain its monopoly to the detriment of consumers."

The European Commission found in May that Intel had engaged in anti-competitive practices and assessed the largest fine in EU Regulatory history. The company continues to appeal the $1.58 billion fine.

"Anti-competitive practices" is the same complaint that New York state attorney, Andrew M. Cuomo, claimed in their detailed 83-page complaint [PDF download]. New York is alleging that Intel "engaged in a systematic worldwide campaign of illegal, exclusionary conduct to maintain its monopoly power and prices in the market for x86 microprocessors."

Intel also agreed last month to settle long-running antitrust litigation and patent disputes with AMD. Under the terms of settlement, Intel will pay AMD $1.25 billion and "agreed to abide by a set of business practice provisions. As a result, AMD will drop all pending litigation including the case in U.S. District Court in Delaware and two cases pending in Japan. AMD will also withdraw all of its regulatory complaints worldwide."

Richard A. Feinstein, director of the agency?s Bureau of Competition, said in a statement: "Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly. It?s been running roughshod over the principles of fair play and the laws protecting competition on the merits."

The FTC has added additional complaints to their charges, focusing on video graphics chips and software. These were not mentioned in the New York suit, nor in the EU complaint. The FTC said that Intel?s tactics include making it more difficult for its rivals? graphic chips to work smoothly with Intel?s microprocessors. The graphics chip area revolves around a suit by Intel against Nvidia, who counter-sued Intel.

Intel and the FTC have been in lengthy discussions to settle the dispute. Intel contends that the FTC staff brought up the graphics chip accusations and chip-related software late in the talks, asking about some details as recently as December 8th. Intel?s recently hired anti-trust general counsel, Douglas Melamed, said in a conference call that the FTC action was "misguided and unwarranted."

There have been rumors that Nvidia doesn’t have a legal leg to stand on in their counter-suit. We asked an engineer familiar with past patent disputes with Intel. He said: "If VIA hadn’t counter-sued Intel for violating three patents it held through Centaur Technology, Intel would have successfully terminated VIA’s access to critical patents causing a severe disruption to VIA’s CPU and chipset businesses. Thus, if Nvidia doesn’t have similar patent artillery to fire back at Intel, they have little chance to continue chipset development for new Intel CPU designs."

Nvidia CEO Jen-Hsun Huang issued a statement: "We support today?s action by the FTC, which has fully recognized Intel?s behavior as an impediment to progress in the computer industry and to consumer choice." He added that, "The GPU is critical for common applications like graphics, video and photo processing. Today?s filing is sorely needed to stop Intel from using unlawful tactics to lock out the GPU and block consumers from its revolutionary benefits."

We asked GlobalFoundries for a statement and they said to ask AMD. We asked AMD for comment and they have not responded to our request as of our publication deadline.

Perhaps we?ll hear before our next installment goes to press ? covering the FTC complaint about Intel’s compiler and their use of benchmarking claims which have adversely affected the industry and consumers.